Aug 2015 Financial News

Fitch gives buyback bond a B- rating

Aug 05, 2015

INTERNATIONAL rating agency Fitch Ratings, upon assessing the US$2 billion raised by Government last month on the international markets, assigned a rating of B- to the offer.

It is based on Jamaica's US$1.35 billion in bonds maturing on 28 April 2028 and US$650 million of bonds maturing on 28, July 2045.

"Jamaica's B- rating is driven by its very high government debt burden, low growth, and fragile but improving external finances," stated Fitch in its latest filings on the island issued last week.

The proceeds from the bonds will purchase Jamaica's just under US$3 billion in PetroCaribe debt owed to State-owned Venezuelan oil company Petroleos de Venezuela SA (PDVSA) for US$1.5 billion, or a discount of just under 50 per cent. The remaining funds will be allocated for what the prospectus describes as "general budgetary financing".

Fitch also indicated that the outlook remains positive, influenced by the Government's continued meeting of fiscal conditionalities as part of its three-year extended fund facility with the International Monetary Fund.

"[The] current account deficit has narrowed and there are signs of improved business confidence and growth prospects," stated Fitch, adding that the rating would be sensitive to any changes in Jamaica's long-term foreign currency Issuer Default Rating (IDR).

Fitch earlier in February this year revised the outlook on Jamaica's ratings to positive from stable and in February 2014 upgraded the island's long-term foreign-currency IDR to B-.

The country could have issued a limit of US$3 billion -- even so, investor demand reached as high as US$4.5 billion.

The debt buyback, coupled with the repayment of existing maturities, is projected to reduce Jamaica's debt-to-GDP ratio to 123 per cent from 137 per cent by the end of the fiscal year in March.

According to the Opposition, however, taxpayers will now be required to pay approximately US$94 million or J$11 billion more in interest payments, annually.

Source:
BY STEVEN JACKSON
jacksons@jamaicaobserver.com
Business reporter
Jamaica Observer
Wednesday August 5, 2015

http://www.jamaicaobserver.com/business/Fitch-gives-buyback-bond-a-B-rating_19222293